October 17, 2019 - From the October, 2019 issue

GO-Biz Chief Lenny Mendonca on the Future of Work

At Propel L.A.'s 88 Cities Summit on September 19, Governor Newsom's Chief Economic & Business Advisor, Lenny Mendonca, sat down with Loyola Marymount University StudyLA Director, Dr. Fernando Guerra, to discuss the fundamental shift transforming the nature of work and how the nation-state of California reacts, defines, and regulates this fast-changing landscape. Pointing to the economic opportunity at the intersection of equity and sustainability, Mendonca emphasizes the need to integrate climate goals with broad-based, community-driven economic development to create a resilient and robust "California for All."


Lenny Mendonca

“You can’t have an attractive, vibrant economy that’s inclusive, if it’s not sustainable…All of our planning and efforts on economic development need to be integrated and aligned with the state’s climate objectives."—Lenny Mendonca

Fernando Guerra: When the governor first approached you about this job, what was that conversation like? 

Lenny Mendonca: I’ve worked with the governor since he was mayor of San Francisco. I did a lot of work with him when he was lieutenant governor; I helped him write his economic development plan. He chaired the California Economic summit that I oversaw as the co-chair of California Forward. We’ve done a lot of work together, and I told him in the process leading up to inauguration, that I’d be happy to help in whatever way I could be helpful. My assumption was that was going to be from the outside. I had no intent to work in government. 

I’ve never worked in government. I was in the private sector for 30 years, and then I retired for 4 years. He asked if I would help him recruit his senior people, which I said I would. I was giving them ideas and encouraging people to come, and then he told me that he’d had enough of me trying to give him ideas, and that he needed me on his staff. The first time I walked into a meeting with him, he said he’d Dick Cheney’d me, which I did not find funny, but here we are.

Fernando Guerra:  What are the initiatives? You come from McKinsey & Co, a company that many of us are familiar with as who you hire to come in to tell you what’s going on and what you should be doing, strategically.  I assume you use that same type of approach for the State of California. Where are we as a state? What are our strengths and weaknesses? What do we need to do in the next three or four years during this administration?

Lenny Mendonca: The first thing to recognize is that we’re a nation— a nation-state with the fifth largest economy in the world. You have to think about it at that scale and acknowledge that while we do have the ability to help shape what’s happening nationally, we also recognize that there are a lot of things that we don’t have any control over that are going to determine the fate of the economy. We don’t have any influence on the macro-factors—like monetary policy—that make a big difference. 

We unfortunately don’t have as big a voice as we might like on our role globally, we’re subject to circumstances not under our control.. But we do have a lot of influence—and get to spend our time thinking about—things that are, in effect, domestic policy issues—without having to worry about national defense and security. The things that we’re really focused on are under the overall banner of ‘California for All,’ which is the idea that we have a big, nation-scale economy that is in many ways as robust as it’s ever been. 

We do have our challenges. It’s an economy that works really well if you happen to be in particular geographies with particular backgrounds and, unfortunately, with particular demographies. If we’re going to have a model economy that really is for all, we have to have one that is robust, growing, and creating a future for much a larger portion of the state of California. A lot of the agenda is around inclusiveness and ensuring that we have an economy that works much more broadly. 

That’s what got me excited about doing this job. I was not particularly interested in—like many other state’s economic development activities—getting on the phone and calling businesses to see if they’ll move their headquarters here.  

Fernando Guerra: When you think of the economy at the core, the base, of course, is jobs. Jobs are changing dramatically, and the state’s trying to shift that. We’ve all heard about AB 5—the governor signed it and signed it quickly. Give us your thoughts on how this changes the future of work. How does it help the State of California economically prosper? Does it present certain challenges?

Lenny Mendonca: AB 5 was a bill that codified an existing state Supreme Court decision.The Supreme Court of California had a ruling—called the ABC test—that was about how people were classified as independent contractors or employees. This bill (AB 5)—that was initiated by Senator Gonzalez—ended up codifying that decision, and the governor signed it yesterday. It’s part of an element of trying to think through the future of work in the state. This is near-term and specifically trying to address something that is widely acknowledged: our labor codes don’t reflect the way work is happening. 

At the federal level, we need to think through that. We have classifications that were built fifty years ago that don’t reflect how work has evolved. Some of that is going to need to be handled at the national level, and some it we need to get ahead of at the state level. Just last week, we kicked off the Future of Work Commission, which is trying to think about how the future of work is already here. California is the place where the future starts. As technology is invented here, it often gets applied here first. 

Fernando Guerra: Playing devil’s advocatethere’s been a lot of criticism about AB 5 that it stifles innovation in California. 

Lenny Mendonca: I don’t believe that. First of all, remember that—as the governor said in his signing address—this is the beginning, not the end of the conversation. There’s room to modernize a whole set of things—including how that’s implemented—the legislature will pick it up again, and there will be more conversation about where we go. The state thrives on innovation and we need to continue that. What we don’t want is innovation that is about regulatory arbitrage. 

We want people to innovate for the benefit of customers and society. We don’t want people to think that the first few hires you need are a legal team and a lobbyist. We want people to focus on what they really should. Nothing against lobbyists, but I really wished start-up companies focused on bringing value to customers, not about how to get around regulations.

Fernando Guerra: This Commission for Future Work, what are its goals?

Lenny Mendonca: It’s a broad public commission that will hold a series of meetings—including one here in Southern California in the next couple of months—thinking about how technology and the evolution of work is going to affect the State of California. How do we ensure that we continue to have that innovation here and deployed here and that our workforce and secondary education systems are ahead of it?

Ironically, one of the first things we did was hand out to all the commissioners the Future of Work Commission Reportfrom 1964 that we had to go photocopy from the Library of California. The commissioners were all white men, but it was talking about issues that if you just change the time frame, you’d recognize many of the same challenges just with different technologies. They talked about a whole set of things—a portable safety net and guaranteed income—a great depiction of the issues that we’re still talking about today. But we now need to think about if we really are a nation-state and have the opportunity to address these things, how do we get ahead?

Fernando Guerra: Another major initiative that you’re working on is Regions Rise Together. There’s a strength to focusing just on regions, but we’re all part of the state—even though we’re looking at LAEDC, which focus on LA county. What are the goals? What are the resources that you can find in this initiative?  

Lenny Mendonca: One of the things I’ve really enjoyed about the role that I’m playing is the opportunity in the last several months to travel up and down the state. When you do that, you realize how diverse and different the state is. When you try and do policy at the state level, you end up being, on average, wrong for almost everyone. 

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What we need to do is think about the state as a collection of regions and help encourage and support great work in the Inland Empire, Fresno, Central Valley. How do we encourage and support regions as they think about their own economic development activity, and align state activity to support and encourage that. There are some things that the state has particular influence over to connect the regions. It’s really focused on regions, but regions rising together. 

It’s not helpful for the state if 70 percent of the job growth is on the coast, but most of the population growth isn’t. It just means that people are sitting on freeways all day. We need to have more housing production where the jobs are, more jobs where people are commuting from, and an alternative transit system—particularly rail—that connects those so that we’re not having people spend three hours a day sitting in a car by themselves polluting the economy and destroying communities and family life.

Fernando Guerra: Talk to us about how high-speed rail and its development impacts the work that you’re doing. How are you and the governor thinking about the future that effort. 

Lenny Mendonca: That was another one of those things that was not on my to-do list when I agreed to join the administration, but the governor asked me to chair that board for a couple of reasons. We’re really at the point now where lot of what we need now is to deliver. A lot of focus is on the building block approach that gets the first portion up and running—aligned with the requirements from our federal grants—in the Central Valley. Moving from Bakersfield through to Merced will be the first realm of that.

At the same time, we’re doing a lot of work to accelerate the environmental clearance and permitting that’s necessary to ensure that—both in Southern California and in the Bay Area—we’re prepared to take the next stage to connect the rail system from San Francisco to Los Angeles, and through to San Diego. 

It’s an essential element of ensuring that we do have regions connected. The airports are just jammed. For intra-state travel, we shouldn’t be dependent on airports or cars. We really do need that connective tissue that ensures it’s all connected. 

Fernando Guerra: President Trump was in California this week, and he revoked the state’s Clean Air Act waiver. We’re obviously going to sue, any thoughts about that? 

Lenny Mendonca: It feels like every week we wake up and see something stupid coming out of Washington. Ensuring that we are moving forward sometimes requires that we remember we’re not a monarchy, let alone a dictatorship. We have these things called courts to ensure that things are fair. The amount of effort and energy feels like it’s a Full-Employment Act for lawyers that are suing the Trump administration making sure we keep making progress. We will on this one too, and we’re winning all of those cases.

The answer is that we need to move forward as best we can on things that we can control—and when there are things that are opposed to that progressive movement forward and stymieing progress —we need to protect our right to move forward.  

Fernando Guerra: In terms of climate change and creating a clean energy economy, what is your office going to try to really focus on?  

Lenny Mendonca: The effort—co-led by our office and Kate Gordon, the governor’s senior advisor on climate—is an integrated issue. You can’t have an attractive, vibrant economy that’s inclusive, if it’s not sustainable. Everyone in California recognizes that climate change is real, and it’s here today; you only have to look at the fire seasons and the dramatic weather shifts. We can’t ignore this. All of our planning and efforts on economic development need to be integrated and aligned with the state’s climate objectives. 

The governor will be at Climate Week in New York next week. California is done talking about and debating climate change; we’re responding to it now, and aggressively. Take electric vehicles as an example of how sustainability can drive markets, not just add expense or mitigate impacts. No one knew what zero-emissions vehicles were a decade ago. California set the most aggressive climate standards to encourage the development of that industry. My office is helping ensure that the infrastructure to support zero emission vehicles is there, and now it’s the eighth largest export from the State of California. We have a whole set of things that are in place that will encourage these markets to continue to grow.

We need to work even harder. The next wave is going to be on trucks. Particularly in the Inland Empire; you can’t help but notice there are a lot of trucks moving in and out. We need to think about and encourage investment and innovation to make sure those vehicles are zero emission as well. It may not be electric, it might be hydrogen, but we need to encourage a very aggressive movement to address climate change, because it’s here and the effects are real.

Fernando Guerra: Do you consider SB 1 a climate change bill? Why is the Governor against it?

Lenny Mendonca: I’ll let the governor speak for himself when he decides what to do about it. Some of these things are more complicated than the headlines. Casting something in the media as “Trump insurance” is not particularly helpful when it’s a deep, complex legal issue. 

The issue is trying to ensure that we’re encouraging the use of best practices, understanding that we want to move forward and not be subject to efforts by the Trump administration to reverse real progress. There are different ways to deal with that; some of them are legislative and appropriate, and some of them are better handled than other ones. 

Fernando Guerra: You’ve been in government now for about six months. What has surprised you the most about being in government?

Lenny Mendonca: The biggest excitement that I get is from being out and around the state. There is so much enthusiasm, interest, and excitement happening on the ground. The more we delegate up, whether that’s to the state level, or when we say we’re waiting for some great new president or congress to do something— especially if you’re looking at social media or listening to talk radio—you get depressed that nothing is possible. But when you actually see what’s going on, it’s incredibly interesting; the state is reinventing itself again. That to me is very encouraging. So, I spend a lot of time trying to discourage people from delegating up. A lot of the activity happens in communities and regions, so trying to reorient the mental map of California has been fun and encouraging.

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© 2019 The Planning Report | David Abel, Publisher, ABL, Inc.